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Legislation may be the only way to fix payment times: Ombudsman

The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell has warned big business that if they continue to flout reasonable payment terms, she will have no choice but to recommend federal legislation requiring all businesses to be paid in 30 days.

Legislation may be the only way to fix payment times: Ombudsman
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  • Maja Garaca Djurdjevic
  • February 13, 2020
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In the past week, Telstra and Rio Tinto have moved to 20-day payment terms for SMEs and Ms Carnell believes "there is no reason why other big businesses can’t do the same".

“Australia’s big businesses have had more than enough chances to do the right thing, so if they can’t follow Telstra and Rio’s lead, I will have no choice but to recommend legislation requiring 30-day payment terms across the board," said the Ombudsman. 

Late payments by large businesses to small businesses account for 53 per cent of all invoices, that's $115 billion paid late to small businesses – equivalent to $7 billion of working capital to Australian small businesses every year, the Ombudsman's data shows. 

“The economic case for faster payment times is clear, not just in Australia but internationally. When the Obama administration moved to 15-day payment times, a Harvard Business School study found that created 75,000 jobs and delivered an additional $6 billion to US workers’ pay packets," said Ms Carnell. 

“Our recently released position paper outlines the key preliminary findings of our Supply Chain Financing Review and we are seeking feedback on that before making formal recommendations."

So far, the Ombudsman's Supply Chain Financing Review has revealed the voluntary Supplier Payment Code is "just not working". 

“The code is voluntary, there is no compliance monitoring and it’s actually unenforceable," said Ms Carnell. 

“The fact is that all businesses, regardless of their size should be paid in 30 days and supply chain finance should be available to those small businesses that want to be paid faster.”

The Ombudsman's final report will be handed down at the end of March.

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